FOUR INDIVIDUALS CHARGED WITH MONEY LAUNDERING AND DISTRIBUTION OF ILLEGAL STEROIDS

Grand Jury Returns 42-count Indictment Charging Individuals Associated with Bay Area Lab Cooperative (BALCO)

The charges returned by the grand jury today are: conspiracy to possess with intent to distribute anabolic steroids; possession with intent to distribute anabolic steroids; conspiracy to defraud the United States; introduction and delivery of misbranded drugs into interstate commerce with intent to defraud; and misbranding of drugs held for sale with intent to defraud.  In addition, defendants Conte, Valente, and Anderson are charged with possession of human growth hormone with intent to distribute, conspiracy to launder monetary instruments and money laundering. 

Under federal law, distribution of steroids is illegal because anabolic steroids are a controlled substance.  Another federal law makes it illegal to distribute human growth hormone except under limited circumstances.  The defendants are also charged with misbranding  tetrahydragestrinone (THG )– essentially, failing to correctly label the drug they were selling – which is a criminal violation of the Food Drug and Cosmetic Act. 

"Nothing does more to diminish our potential - both as individuals and as a nation - than illegal drug abuse," said Attorney General Ashcroft.  "The tragedy of so-called 'performance enhancing' drugs is that they foster the lie that excellence can be bought rather than earned and that physical potential is an asset to be exploited rather than a gift to be nurtured.  Illegal steroid use calls into question not only the integrity of the athletes who use them, but the integrity of the sports they play.  These drugs are bad for sports, bad for the players and bad for the young people who look to athletes as role models."

"These illegal substances threaten to undermine the integrity of sport at the highest levels:  at the Olympics, in the NFL and in Major League Baseball," said U.S. Attorney Ryan.  "The allegations contained in this indictment involve an organized effort to distribute illegal anabolic steroids and other performance-enhancing substances to top athletes.   The indictment also alleges a systematic cover-up concerning the true nature of the drugs being trafficked in, by disguising the drugs, and by laundering the proceeds of the crime.  The use of steroids sends exactly the wrong message to America's youth.  In reality, there are no shortcuts to success." 

"Similar to tax evasion, money laundering is a means by which criminals conceal the proceeds of illegal activity from the government," said IRS Commissioner Everson.  "This investigation took shape when an IRS Criminal Investigator detected suspicious cash transactions on the part of Mr. Conte, through a combination of traditional detective work and through the use of data housed in the Currency Banking Retrieval System, an anti-money laundering tool which tracks large movements of cash."

"FDA will continue to work with our law enforcement partners to take action against those who endanger the public by manufacturing, distributing, or selling illegal drugs and misusing legal drugs," said FDA Commissioner Mark B. McClellan M.D., Ph.D.  "Unapproved anabolic steroids pose serious long-term health risks, and powerful prescription medicines like erythropoietin carry important risks when misused."

"The indictments brought about by the investigation into the clandestine operations of Balco Laboratories illustrates the integral level of cooperation between city, county, state, and federal agencies to successfully infiltrate the illicit drug marketplace," said Trisha Sanchez, Commander of the San Mateo County, California Narcotics Task Force.

The indictment alleges that between December 2001 and September 3, 2003, Mr. Conte, Mr. Valente, Mr. Anderson, and Mr. Korchemny conspired to possess with intent to distribute anabolic steroids, and alleges six separate occasions in which steroids were actually distributed to athletes.  The indictment further alleges that between September 1, 2000, and September 3, 2003, Mr. Conte, Mr. Valente, Mr. Anderson, and Mr. Korchemny conspired to defraud the United States through the distribution of drugs to athletes in violation of federal law in the following way:

•The defendants distributed an anabolic steroid in the form of a testosterone-based cream the conspirators described as "The Cream," without adequate directions regarding its use in its labeling.  According to the indictment, the steroid had been mixed with an epitestosterone cream prior to its distribution to athletes specifically with the intention of balancing the user's testosterone/epitestosterone ratio, thus concealing the individual athlete's elevated testosterone level from drug testing. 

•The defendants distributed a liquid drug described as "The Clear," subsequently identified as "tetrahydragestrinone" or "THG," without adequate directions regarding its use in its labeling.  According to the indictment, the co-conspirators recommended the substance to athletes as a "designer steroid" or "steroid-like derivative" which would provide "steroid-like" effects without causing the athlete to test positive for steroids.

•The defendants dispensed human growth hormone, erythropoietin ("EPO") and modafinil to athletes without a required prescription and for a purpose other than treatment of a disease or recognized medical condition.

The indictment further alleges that Mr. Conte, Mr. Valente, Mr. Anderson, and Mr. Korchemny used a variety of techniques to execute their conspiracy to mask their activities and defraud federal law enforcement, including the use of false names on mailing labels of packages containing drugs; trafficking in drugs explicitly designed to avoid detection as controlled substances; and by referring to drugs in correspondence by using shorthand abbreviations and codes such as "The Cream," "C," "The Clear," "Liquid,"  "L," "G," "E," "P," and "Vitamin S." 

In one email described in an IRS Special Agent's search warrant affidavit, after he instructed a coach to refer to drugs only by initials.  Mr. Conte wrote, "And remember that all emails are saved for a very long time, so be careful about how you say what you say.  Searches for keywords like ‘anabolic' and many others are going on at all times by big brother." 

According to allegations in the case, the defendants provided athletes with false cover stories to provide to authorities.  Mr. Conte is also alleged to have entered into agreements with athletes in which they agreed to endorse ZMA, a nutritional supplement sold by Mr. Conte, in return for free drugs.

The indictment further alleges that defendants Conte, Valente, and Anderson conspired to launder the proceeds derived from the sale of anabolic steroids by: (1) segregating the proceeds derived from the sale of anabolic steroids from normal business proceeds by placing the criminal proceeds into a personal bank account; and (2) using a third party to negotiate checks written as payment for the purchase of anabolic steroids, rather than depositing the checks as normal business proceeds.  

The maximum statutory penalty for the charged violation of conspiracy to possess with intent to distribute anabolic steroids and for possession with intent to distribute anabolic steroids is five years imprisonment and a $250,000 fine.  The maximum statutory penalty for each violation of introduction and delivery of misbranded drugs into interstate commerce with intent to defraud and misbranding of drugs held for sale with intent to defraud is three years imprisonment and a $250,000 fine.  The maximum penalty for each violation of possession of human growth hormone with intent to distribute is five years imprisonment and a $250,000 fine.  The maximum penalty for conspiracy to launder monetary instruments and for money laundering is 20 years imprisonment and a $500,000 fine.  However, any sentence following conviction would be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and would be imposed in the discretion of the Court. 

It is important to note, an indictment simply contains allegations against an individual and, as with all defendants, Mr. Conte, Mr. Valente, Mr. Anderson, and Mr. Korchemny must be presumed innocent unless and until convicted.

No-bail arrest warrants have been issued for Mr. Conte, Mr. Valente, Mr. Anderson, and Mr. Korchemny, but are stayed until noon on February 13, 2004.  The defendants will have the opportunity to self-surrender and make their initial appearances in federal court in San Francisco on February 13, 2004 at 9:30 a.m. before Magistrate Judge Maria-Elena James.

The prosecution is the result of an 18-month investigation overseen by the U.S. Attorney's Office as well as special agents of the Internal Revenue Service Criminal Investigation Division, the Food and Drug Administration Office of Criminal Investigations and the San Mateo County Narcotics Task Force.  In addition, the Bureau of Immigration and Customs Enforcement provided assistance in connection with the investigation.  Jeff Nedrow is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Susan Kreider.

Press inquiries to the U.S. Attorney's Office should be directed to Assistant U.S. Attorney Matthew J. Jacobs at (415) 436-7200.